Waste Management 2006 Annual Report Download - page 75

both 2005 and 2006. These improvements were partially offset by declines in revenues due to lower volumes in the
collection line of business, particularly in our Eastern Group. See the additional discussion in the Operating
Revenues section above.
The operating results for the year ended December 31, 2006 also compare favorably with the prior years due to
the $27 million restructuring charge recognized during the third quarter of 2005. “Corporate and other” reflects
$10 million of this impact with the remaining $17 million allocated across the operating Groups. See additional
discussion of these charges in the Restructuring section above.
Other significant items affecting the comparability of the operating segments’ results of operations for the
years ended December 31, 2006, 2005 and 2004 are summarized below:
Eastern — The Group’s operating income for the year ended December 31, 2006 was negatively affected
by $26 million in charges associated with (i) the impairment of businesses being sold as part of our divestiture
program and (ii) the impairment of a landfill. The year ended December 31, 2005 was negatively affected by
the recognition of $44 million in impairment charges related primarily to the Pottstown landfill. Finally, the
operating results of our Eastern Group for 2006 and 2005 were negatively affected by costs incurred in
connection with labor strikes. For the year ended December 31, 2006, we incurred $14 million of costs related
primarily to a strike in the New York City area. The Group incurred similar costs during the first quarter of
2005 for a labor strike in New Jersey, which decreased operating income for the year ended December 31, 2005
by approximately $9 million.
Midwest — Positively affecting 2005 results compared with the prior year was a decline in landfill
amortization expense generally as a result of changes in certain estimates related to our final capping, closure
and post-closure obligations.
Southern — During 2005, several large non-recurring type items were recognized, impacting compar-
isons to the other periods presented. These items include $13 million of pre-tax gains recognized on the
divestiture of operations during 2005 and declines in earnings related to (i) hurricanes, largely due to the
temporary suspension of operations in the areas affected by Hurricane Katrina; (ii) the effects of higher landfill
amortization costs, generally due to reductions in landfill amortization periods to align the lives of the landfills
for amortization purposes with the terms of the underlying contractual agreements supporting their operations;
and (iii) higher landfill amortization expense as a result of changes in certain estimates related to our final
capping, closure and post-closure obligations.
Western — Gains on divestitures of operations were $48 million for the year ended December 31, 2006 as
compared with $24 million for 2005 and $10 million for 2004.
Wheelabrator — The electric rates we charge to our customers at our waste-to-energy facilities increased
significantly during the latter portion of 2005 as a result of higher market prices for natural gas. The rates we
charge customers are indexed to natural gas prices, which increased significantly as a result of hurricane-
related production disruptions, increased demand and increases in crude oil prices. This increase in rates was
the principal reason for the 2005 increase in Wheelabrator’s income from operations as compared with 2004.
The favorable impact of market prices for natural gas was partially offset by higher costs of goods sold and
higher repair and maintenance costs due to the scope and timing of maintenance performed in 2005 as
compared with 2004.
Recycling — During 2006, the Group recognized $10 million of charges for a loss on divestiture and an
impairment of certain under-performing operations, which were slightly more than offset by savings asso-
ciated with the Group’s cost control efforts. The decrease in income from operations in our Recycling Group
during 2005 when compared with 2004 can generally be attributed to (i) an increase in the rebates paid to our
suppliers as a result of increased competition; (ii) costs related to the deployment of new software; and
(iii) higher subcontractor costs primarily related to increased distances traveled by third-party haulers.
The comparability of operating results for the Recycling Group for all of the periods presented has been
affected by variances in the market prices for recyclable commodities. During the three years ended
December 31, 2006, year-over-year changes in the quarterly average market prices of OCC and ONP have
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